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Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.81 million. The marketing department predicts that sales related to the project will be $2.51 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 20 percent of sales. Howell also needs to add net working capital of $160,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 34 percent. The required rate of return for Howell is 16 percent. What is value of NPV?
Suppose the spot exchange rate for the Canadian dollar is Can$1.04 and the six-month forward rate is Can$1.06. Which is worth more, a U.S. dollar or a Canadian dollar?
Calculate the combined value of the proposed acquisition and calculate the net present value of the proposal
How purchase of the apple press might affect the company revenue goals - return on investment for new capital investments and the company uses a cost of capital of 8.
What is the Net Present Value (NPV) of the asset if the company's required rate of return on such assets is 10%?
How much money will Tom and Tricia have in 45 years if they do nothing for the next 10 years, then puts $2400 per year away for the remaining 35 years? How much money will Tom and Tricia have in 45 years if they put $2400 per year away for the next 1..
1.explain concept of financial intermediation. how does the possibility of financial intermediation increase the
Suppose a firm in planning to invest $ 1,000,000 to invest in a risk free asset and a risky asset A. Assume that µf = 0.05, µA = 0.10 and ?A = 0.17. The company has capital reserves that could cover $ 100, 000 but no more and would like as a result t..
Consider the following capital market: a risk-free asset yielding 0.75% per year and a mutual fund consisting of 70% stocks and 30% bonds. The expected return on stocks is 10.75% per year and the expected return on bonds is 3.25% per year.
Trivoli Industries plans to issue perpetual preferred stock with an $11.00 dividend. The stock is currently selling for $99.50; but flotation costs will be 5% of the market price, so the net price will be $94.53 per share. What is the cost of the pre..
The operating cost of a new machine is $500 for the first year. Starting the second year, the operating cost increases by $200 per year for the next 10 years. Calculate the equivalent annual operating cost of the machine. What will be the present and..
A stock had returns of 14 percent, 25 percent, and 3 percent for the past 3 years. Based on these returns, what is the probability that this stock will earn at least 25.00 percent in any one given year? 5.0 percent 1.0 percent 2.5 percent 0.5 percent..
powertool is the largest us manufacturer of industrial hand tools. its sales force is strong but clients have
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